FTC pens new Model Timing Agreement for merger reviews

Adapted from “Timing is Everything: The Model Timing Agreement,” by Bruce Hoffman, U.S. Federal Trade Commission Bureau of Competition … Recent FTC Bureau of Competition initiatives are geared to streamlining the merger review process in order to reach swifter resolutions—whether that be clearance, a negotiated settlement or lawsuit. As part of these efforts, the agency has codified a new Model Timing Agreement for Bureau reviews.

Merger investigations commonly involve such agreements, as they provide an agreed-upon framework for the timing of certain steps in an investigation, and also ensure that FTC staff has notice of parties’ plans to consummate the transaction. Both parties and staff benefit from having such a framework established shortly after issuance of the Request for Additional Information and Documentary Material, also known as a Second Request, as it allows staff and the parties to engage efficiently in a substantive exchange without undue uncertainty during the Second Request review period.

The Bureau began using a version of the Model Timing Agreement earlier this year, and staff has refined its provisions based on feedback and experiences in recent merger investigations. The Bureau will publicize any forthcoming updates to the Model, and notes that a timing agreement does not affect the statutory expiration of the Hart-Scott-Rodino waiting period. Regardless of the commitments made in the timing agreement, the HSR waiting period expires 30 days after the parties certify substantial compliance with the Second Request. (These periods may differ in a cash tender or bankruptcy filing.) Additional time provided by the parties beyond this 30-day waiting period is by agreement, and does not alter this statutory provision.

KEY PROVISIONS

New Model Timing Agreement provisions will be familiar to those who regularly engage with the Bureau, but here are a few highlights:

The Model requires parties to agree not to close the proposed transaction until 60 to 90 calendar days following certification of substantial compliance with the Second Request depending on the complexity of the competition issues the deal raises. Consistent with prior practice, this framework is intended to serve as a benchmark and not an upper limit.

Post-compliance timing will depend on the circumstances of each case. For instance, in matters involving particularly complicated industries, staff may need more than 90 days to analyze data or information before making a recommendation to the Commission. In addition, the Model requires that the parties provide 30 calendar days’ notice before certifying substantial compliance with the Second Request, and 30 calendar days’ notice before consummating the proposed transaction. These notice requirements help staff structure the timing of preparing a recommendation on the matter. More importantly, they allow staff to plan an appropriate timeline for any meetings that the parties would like to have with division management, the Bureau’s Front Office, and individual Commissioners so that parties have opportunities to present their arguments and evidence prior to expiration of the agreed-upon review period.

Parties that seek to limit staff’s time to review Second Request materials may foreclose the opportunity to meet with the Bureau or Commissioners, who may have to devote their energies to preparing or reviewing recommendations to the Commission. Further, parties are advised not to file their notice of intent to consummate the transaction if they know that they cannot close within 30 days. Rather, they should file the notice when they actually expect to be able to close. An early notice would force the Bureau to assume that closing was imminent and take any necessary steps based on that assumption. Such a misunderstanding could negatively alter on-going negotiations with the parties.

With respect to communication and exchange of information, the Model Timing Agreement commits Bureau staff to engage in a good-faith continuing dialogue regarding facts and relevant legal and economic issues related to the case. Agency officials encourage parties to raise arguments and present white papers early in the review process. Waiting until the meeting with the Bureau Front Office, or even until meeting with the Commissioners, to submit white papers and advance arguments for clearance does not serve the parties well. The Bureau Front Office is not able to engage fully on arguments not raised with or vetted by Bureau staff and division management. Note that, even though the Model anticipates continuing dialogue with Bureau staff, the Bureau Front Office will continue to adhere to the practice that it will meet only once with the parties during the Bureau’s review of the matter. Parties are free to take that meeting whenever they like, but an early meeting on a discrete issue, rather than a later meeting on the Bureau’s broader recommendation to the Commission, may not be the parties’ best use of this opportunity.

The Model contains timing and logistics provisions regarding document production and investigational hearings. They ensure that Bureau staff has adequate time to review information submitted by the parties, and provides parties with sufficient notice of the identity of potential hearing witnesses.

Finally, the Model includes a stipulated Temporary Restraining Order that prevents the parties from consummating the proposed transaction until after the fifth business day following a court ruling on a motion for a preliminary injunction. This provision is designed to avoid time-consuming and distracting negotiations between the parties and staff related to a TRO. That time could otherwise be spent on substantive discussions or potential settlement negotiations. Multiple parties have agreed to such stipulated TROs in the past year and this has functioned as a significant benefit to both sides by allowing Bureau staff, FTC and the parties to focus on the issues in the matter, rather preparing for a TRO hearing.

Expectations Going Forward

The new Model Timing Agreement represents the culmination of extensive input from each of the divisions and regional offices within the Bureau, as well as its Front Office. Bureau staff expects that future agreements will conform, or substantially conform, to this Model, accepting that deviations may be necessary in certain cases. The Front Office reviews all timing agreements before execution and will consider the justification for any changes.

As always, parties are encouraged to reach out to staff early on in a Second Request investigation to negotiate a timing agreement. Part of the goal of an effective timing agreement is to facilitate constructive feedback between Bureau staff and the parties by creating more certainty about the timing of an investigation. FTC officials hope is that the new Model will allow parties to better anticipate Bureau expectations, which should in turn help promote smoother, more efficient investigations.

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